The quick commerce and e-commerce sectors have been steadily growing, with companies now focusing on leveraging the festive season to boost profits.
Ahead of the festive season, retailers fear predatory pricing on e-commerce could hurt sales, as the government examines quick commerce's impact on kirana stores. This in turn raises the question if the online and offline world can co-exist together
The quick commerce and e-commerce sectors have been steadily growing, with companies now focusing on leveraging the festive season to boost profits.
Traditionally, the festive season drives higher sales for these platforms. For instance, during Raksha Bandhan, Blinkit achieved record sales, selling 700 rakhis per minute. A report by TeamLease further predicts a 35 per cent surge in sales for the e-commerce sector this festival season.
However, retailers have expressed fear about e-commerce platforms using predatory pricing to attract consumers. Similarly, concerns have also been raised that quick commerce platforms are eating the share of kirana stores.
Union Minister Piyush Goyal's recent statement in August has heightened concerns, as he noted that the growth of e-commerce platforms is cutting into the market share of traditional mom-and-pop (kirana) stores.
Why Did Retailers Voice Concerns Against Quick Commerce Platforms?
Expressing concern that big brands prefer e-commerce platforms instead of brick-and-mortar stores, up to 1,58,000 electronics and mobile phone retailers contacted leading manufacturers. The All India Mobile Retailers Association (AIMRA) has reportedly written to brands such as Samsung, Poco, Motorola, Realme, OnePlus and iQOO highlighting that they are preferring online platforms. This was reported by the Economic Times.
Consumer electronics and smartphones are the biggest contributors to revenue during festive seasons. A PwC report released in February this year titled How India Shops Online highlights that when it comes to online shopping, mobile phones are the most sought-after electronic product, followed by headphones.
Additionally, the Association of Consumer Electronics and Home Appliances Traders also wrote to brands such as Godrej, Panasonic and Whirlpool and told them that the products should not be sold at a predatory price. This concern is something that was raised by Goyal in August this year where he accused e-commerce players of using predatory pricing to expand their market share.
The e-commerce sector has been growing in India. A study by Boston Consulting Group released in October 2023, mentions that the e-commerce sector is poised to capture 41 per cent of global retail sales by 2027. This is a significant rise from just 18 per cent in 2017. Amid the growth of these platforms, fear by the retailers have been increasing.
However, some retailers feel that they have nothing to lose from e-commerce platforms.
Kumar Rajagopalan, CEO, Retailers Association of India (RAI), told the Economic Times that amid the concern over the divide between retailers and e-commerce players, the focus of retailers has shifted to personalised customer experiences, exploring new collaborations and leveraging AI for efficiency to drive India's retail industry.
To add to it, more than 80 per cent of Indian retailers do not see e-commerce as a threat, as per a study by NeoGrowth released in November 2023. It further highlights that only 18 per cent of retailers see e-commerce as a threat. The report adds that the authentic and trust factor makes 50 per cent of consumers shop offline. As the conversation keeps going between retailers and e-commerce, let’s quickly look at the rift between quick commerce and kirana stores.
Quick Commerce Versus Kirana Stores
The growth of the quick commerce sector might be impacting kirana stores, as per experts. Consequently, the government plans to assess the impact of these platforms and their potential effect on the market share of kiranas. This issue will be addressed in the context of the draft Digital Competition Bill, according to a Business Standard report.
The issue was reportedly raised by the Ministry of Consumer Affairs with the Ministry of Corporate Affairs. A senior official told Business Standard, “We need to assess if and how the bill can address these concerns and explore further steps to include provisions to keep a check.”
Now, coming to the debate about whether quick commerce is eating the share of kirana stores, some feel that it definitely is. Consumer convenience, increased penetration of internet are the reasons for the same.
A report by JM Financial highlights that consumers usually favour a one-stop shopping experience for all their needs, but local kirana stores often stock only 1,000-1,500 stock keeping unit (SKUs) due to constraints like limited storage or financing. This results in a sub-par shopping experience. In contrast, quick commerce platforms' dark stores typically offer over 6,000 SKUs, leading to higher customer satisfaction.
However, some experts believe that the fact that kirana stores give a sense of personalisation for consumers will make them stay despite the growing competition in the quick commerce space.
"I think the unique strengths of kiranas—such as their ability to provide smaller SKUs and adapt to local needs—allow them to maintain relevance even as quick commerce expands," says Somdutta Singh, founder and CEO, Assiduus.
Is Compromise Possible?
One thing that need to be noted is that quick commerce has a significant presence in metro cities, with an 8 per cent penetration in the FMCG sector, according to Kantar. Despite this, kirana stores remain dominant, holding nearly 90 per cent of the retail market share. This clearly indicates that when it comes to market shares, kirana's rule.
Nonetheless, Redseer Strategy Consultants highlights that the quick commerce market, currently valued at $2.8 billion, is poised to be a disruptive force that could transform the retail industry. However, what becomes important here is to find a middle ground for both to co-exist.
Dutta says that partnerships between quick commerce and kirana stores could also emerge, creating hybrid models that leverage the strengths of both. Flipkart, for example, with the launch of its quick commerce platform, Flipkart Minutes is focusing on a model where it has tied up with kirana stores instead of dark stores, as per a Moneycontrol report.